Thursday, September 6, 2007

Big Donors and the Gub Ment

There was an interesting story in the New York Times today about current laws that allow Americans to take deductions for charitable donations. The crux of the article is that the system gives an additional advantage to very wealthy people at the expense of the mass of taxpayers. The example the writer gives is that donations to schools are tax deductible, so that a wealthy school district like Woodside receives much more funding than a district that was already poor.

I never thought about the big subsidy that taxpayers give to allow people with means to fund--whatever they want. But it does concern me that very wealthy Americans have so much control over major world issues. And I am skeptical of the idea that say Bill Gates is a saint, or Bono. Basically these are very wealthy people who don't have to sacrifice their least desire, and their philanthropic work increases their fame. It is not a case of giving and getting nothing--all of a sudden they are named Man of the Year. The same is true with other famous philanthropists--We've all heard of the Rockefellers, the Carnegies, the Mellons, in part because of the money they gave away. But other people worked hard, suffered, to get them those riches. Those people don't have the same philanthropic choices.

On one hand I think the tax deduction is good, because it does provide an incentive to give. I have previously seen figures showing that the US is exemplary in the rate of private charitable giving. And the philanthropic choices of the rich that the article mentions, like art galleries, concert halls, the environment, and foreign plagues--these are important, and our government does not fund them sufficiently. On the other hand, maybe it is just too undemocratic to allow this massive shelter for the rich, who then control situations all over the world. Thoughts?

1 comment:

dong
said...

I'm a fan of tax deductions for charities. I don't think it changes the distribution of power. The fact is the virtue wealth gives people with money power. I'm generally ok with that assuming people have earned their money justly. While I do think the tax breaks allows the rich to direct their monies to things they believe in, I don't think that's so evil. While before they may have subsidizing the choices of the government, they now can direct it as they please. I don't see this as a subsidy that other taxpayers are necessarily paying because inherenty charities themselves serve a public good to society.

Let's say for example society consisted of two people A and B. A makes 100, and B makes $1000. The government needs $110 to function. $10 police and $100 for schools. There's no tax break for charitible giving so the tax rate is 10%. A pays $10, and B pay $100 and the government meets it's revenue target. Let's say a charitable giving deduction is instituted. B decides to give $100 to the school system as result. All of sudden the govt's revenue is only $100 - $10 from A, and $90 from B, but all of sudden the school system doesn't need any money - the government should then be able to lower taxes for everyone. If the tax deduction induces giving then total money given towards public good should offset what shortfall that needs to made up in government revenues.

I think the rich have too many things at their disposal to reduce their taxes, but the charitable deduction is not one I have problem with.